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First Federal Of Northern Michigan Bancorp, Inc. (FFNM) SEC Filing 10-Q Quarterly report for the period ending Tuesday, March 31, 2015

First Federal Of Northern Michigan Banco

CIK: 1128227 Ticker: FFNM
 

First Federal of Northern Michigan Bancorp, Inc. 8-K

 

EXHIBIT 99.1

 

FOR IMMEDIATE RELEASE

April 24, 2015

 

Contact:   Michael W. Mahler
    Chief Executive Officer
    First Federal of Northern Michigan Bancorp, Inc.
    (989) 356-9041

 

FIRST FEDERAL OF NORTHERN MICHIGAN BANCORP, INC.

ANNOUNCES FIRST QUARTER 2015 RESULTS

 

Alpena, Michigan - (April 24, 2015) First Federal of Northern Michigan Bancorp, Inc. (Nasdaq: FFNM) (the “Company”) reported consolidated net earnings of $356,000, or $0.10 per basic and diluted share, for the quarter ended March 31, 2015 compared to consolidated net earnings of $221,000, or $0.08 per basic and diluted share, for the quarter ended March 31, 2014. Annualized return on average assets was 0.42% and return on average equity was 4.58% for the first quarter of 2015 compared to 0.42% and 3.73%, respectively for the prior year period.

The Company’s results for the quarter ended March 31, 2015 include:

 

  • Quarter over quarter increase of $520,000 to net interest income.
  • Provision for loan losses of $23,000 as compared to $16,000 for the prior year period.
  • Quarter over quarter increase in the Company’s non-interest expense of $536,000, primarily resulting from additional staff and amortization of core deposit intangible assets following the merger in 2014.
  • Increase of $14.6 million in the average balance of low cost core deposits during the first quarter of 2015.
  • Book value per share at March 31, 2015 was $8.36 compared to $8.31 at March 31, 2014, primarily reflecting the Company’s improvement to earnings period over period and as a result of the recent merger.

 

When comparing our results for the three months ended March 31, 2015 to the three months ended December 31, 2014 net interest income remained unchanged at $2.3 million. Non-interest income decreased $79,000 to $494,000 for the quarter ended March 31, 2015 from $573,000 for the quarter ended December 31, 2014. This decrease is the primary result of $166,000 of additional bargain purchase gain recorded in the fourth quarter of 2014 offset by an increase of $91,000 in gain on sale of assets held for sale which was recorded in the first quarter of 2015. Our non-interest expenses decreased $151,000 to $2.4 million for the three months ended March 31, 2015 from $2.6 million for the three months ended December 31, 2014. The decrease is primarily related to a reduction of $121,000 in real estate owned expenses and a $23,000 reduction in advertising costs in the first quarter of 2015.

 

Michael W. Mahler, Chief Executive Officer of the Company, commented, “Our growth since the merger in 2014 has resulted in a 29% increase in net interest income and a 60% increase in net income period over period. While we are pleased with this growth, our strategic goal continues to be increasing our residential and commercial loan portfolios to continue the expansion of the Company. We are confident that our strategy will continue to provide earning growth and enhance value for our shareholders.”

 

Craig Kus, President and Chief Operating Officer of the Company, added, “While provision expense increased quarter over quarter, asset quality remains strong as demonstrated by a reduction in our Texas ratio to 14.90% from 17.06% as of December 31, 2014. This is also evident in our reduced levels of non-performing loans and net charge-offs as compared to the same period one year earlier.”

 

 

Asset Quality

 

Total nonperforming assets to total assets decreased to 1.32%, at March 31, 2015, from 1.52% at December 31, 2014 and 1.81% at March 31, 2014. The Company continues to closely monitor nonperforming assets and has taken a variety of steps to reduce the level thereof, such as:

 

  • Timely pursuit of foreclosure and/or repossession options coupled with quick and aggressive marketing efforts of repossessed assets;
  • Restructuring loans, where feasible, to assist borrowers;
  • Allowing borrowers to structure short-sales of properties, where appropriate and viable; securing judgments when feasible and
  • Working with borrowers to find a means of reducing outstanding debt (such as through sales of collateral).

    As of     As of    As of  
    March 31, 2015    December 31, 2014    March 31, 2014 
Asset Quality Ratios               
Non-performing assets to total assets   1.32%   1.52%   1.81%
Non-performing loans to total loans   0.84%   1.29%   1.43%
Allowance for loan losses to non-performing loans   105.19%   66.82%   74.34%
Allowance for loan losses to total loans   0.88%   0.86%   1.06%
                
Texas Ratio   14.90%   17.06%   16.09%
Classified Asset Ratio (2)   22.73%   22.98%   22.71%
                
Total non-performing loans (000's omitted)  $1,373   $2,139   $1,961 
Total non-performing assets (000's omitted)  $4,460   $4,963   $3,899 
                
(1) Texas Ratio is defined by management as total non-performing assets divided by tangible capital plus loan loss reserve.
(2) Classified asset ratio is calculated by dividing classified assets (substandard assets plus real estate owned and other repossessed assets) by core capital plus reserves.
               

Financial Condition

 

Total assets of the Company at March 31, 2015 were $338.9 million, an increase of $13.0 million, or 4.0%, from $325.9 million at December 31, 2014. Securities available for sale increased $6.3 million, or 5.3%, to $126.3 million, while net loans receivable decreased $1.5 million, or 1.0%, to $162.1 million at March 31, 2015.

 

Deposits increased $14.7 million, or 5.4%, to $285.5 million at March 31, 2015 from December 31, 2014. FHLB advances decreased $2.1 million, or 9%, as proceeds from loan payments and payoffs, as well as cash on hand, were used to pay off maturing advances.

 

Stockholders’ equity increased $626,000, or 2.1%, to $31.2 million at March 31, 2015 from December 31, 2014. The increase was due primarily to net earnings for the three-month period of $356,000 and an increase of $345,000 in the unrealized gain on available-for-sale investment securities, offset by a dividend payment of $75,000. At March 31, 2015 First Federal of Northern Michigan remains “well-capitalized” for regulatory purposes, as shown in the table below.

 

2
 

 

              Regulatory    Minimum to be 
   Actual    Minimum    Well Capitalized 
    Amount    Ratio    Amount    Ratio    Amount    Ratio 
             Dollars in Thousands           
                               
Tier 1 (Core) capital (to adjusted assets)  $28,491    8.46%  $15,148    4.50%  $21,880    6.50%
                               
Total risk-based capital (to risk-weighted assets)  $29,935    17.27%  $13,870    8.00%  $17,338    10.00%
                               
Tier 1 risk-based capital (to risk weighted assets)  $28,491    16.43%  $10,403    6.00%  $13,870    8.00%
                               
Tangible Capital (to tangible assets)  $28,491    8.46%  $6,732    2.00%  $6,732    2.00%

 

Results of Operations

 

Interest income increased to $2.6 million for the three months ended March 31, 2015 from $2.0 million for the year earlier period. The increase in interest income resulted primarily from:

 

  • $8.4 million increase in average balances in our mortgage portfolio while the yield on these assets declined 44 basis points to 4.44% from 4.88%.
  • $18.8 million increase in average balance in our non-mortgage portfolio and a 13 basis point increase in yield to 5.29% from 5.16%.
  • $76.4 million in average balance increase in our available for sale investment portfolio while the yield on the portfolio declined 35 basis points to 1.78% from 2.13%.

Interest expense increased to $301,000 for the three months ended March 31, 2015 from $249,000 for the three months ended March 31, 2014. The increase in interest expense was due primarily to:

 

The cost of FHLB advances increasing 13 basis points to 1.20% from 1.07%;
The average balance of interest-bearing deposits increasing $73.2 million with the cost of these deposits decreasing 9 basis points to 0.46% from 0.55%.

 

The Company’s net interest margin decreased to 2.96% for the three-month period ended March 31, 2015 from 3.66% for the same period in 2014 as a result of the factors mentioned above.

 

The provision for loan losses for the three-month period ended March 31, 2015 was $23,000, as compared to $16,000 for the prior year period. During the quarter ended March 31, 2014 we experienced fewer loans requiring specific reserves along with lower level of charge-offs. The provision was based on management’s review of the components of the overall loan portfolio, the status of non-performing loans and other subjective factors.

 

Non-interest income increased to $494,000 for the quarter ended March 31, 2015 from $336,000 for the 2014 period. Income related to mortgage banking activities increased slightly for the three months ended March 31, 2015 when compared to the same period in 2014. In addition, we recorded a gain of $81,000 as the result of the sale of a former operations office during the three-month period ended March 31, 2015.

 

Non-interest expense increased $536,000 to $2.4 million for the 2015 period from $1.9 million for the three months ended March 31, 2014, as we saw increases in the following areas:

 

  • $310,000 in total compensation and employee benefits, as a result of adding staff following the merger in 2014. With increases in the following categories:
    • $180,000 in salaries,
    • $54,000 in incentive compensation,
    • $33,000 for health insurance and
    • $22,000 related to payroll taxes.
  • $44,000 in occupancy,
  • $40,000 in service bureau,
  • $31,000 in amortization of intangible assets,
  • $45,000 in expenses related to troubled credits and real estate owned,
  • Partially offsetting these increases was a decrease of $19,000 in professional service. 
With the increases detailed above our efficiency ratio increased to 86.23% at March 31, 2015 from 84.97% for the prior year period.

 

During the quarters ended March 31, 2015 and March 31, 2014 the Company recorded no tax expense.

 

Selected Performance Ratios

 

   For the Three Months Ended March 31,
   2015  2014
Performance Ratios:          
Net interest margin   2.96%   3.66%
Average interest rate spread   2.83%   3.57%
Return on average assets*   0.42%   0.42%
Return on average equity*   4.58%   3.73%
Efficiency ratio (1)   86.23%   84.97%
Dividend payout ratio (basic)   20.96%   26.04%
           
* Annualized          
(1) Non-interest expense divided by net interest income plus non-interest income, excluding any gains or losses.

 

 

3
 

 

First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries          
Consolidated Balance Sheet          
(in thousands)          
           
    March 31, 2015    December 31, 2014 
    (Unaudited)      
ASSETS          
Cash and cash equivalents:          
Cash on hand and due from banks   19,205    11,205 
Overnight deposits with FHLB   307    267 
Total cash and cash equivalents   19,512    11,472 
           
Deposits held in other financial institutions   8,429    8,429 
Securities available for sale   126,305    119,968 
Securities held to maturity   790    790 
Loans held for sale   413    88 
Loans receivable, net of allowance for loan losses of $1,444,519 and          
$1,429,492 as of March 31, 2015 and December 31, 2014, respectively   162,130    163,647 
Foreclosed real estate and other repossessed assets   3,087    2,823 
Federal Home Loan Bank stock, at cost   2,591    2,591 
Premises and equipment   6,294    6,336 
Assets held for sale   271    478 
Accrued interest receivable   1,090    986 
Intangible assets   1,226    1,286 
Deferred tax asset   658    851 
Originated mortgage servicing rights   671    710 
Bank owned life insurance   4,759    4,727 
Other assets   706    685 
           
Total assets  $338,932   $325,867 
           
           
LIABILITIES AND STOCKHOLDERS' EQUITY          
Liabilities:          
Deposits   285,472    270,734 
Advances from borrowers for taxes and insurance   406    203 
Advances from Federal Home Loan Bank   20,827    22,885 
Accrued expenses and other liabilities   1,065    1,509 
           
Total liabilities   307,770    295,331 
           
Stockholders' equity:          
Common stock ($0.01 par value 20,000,000 shares authorized 4,034,764 shares issued)   40    40 
Additional paid-in capital   28,264    28,264 
Retained earnings   5,046    4,765 
Treasury stock at cost (307,750 shares)   (2,964)   (2,964)
Accumulated other comprehensive income   776    431 
           
Total stockholders' equity   31,162    30,536 
           
Total liabilities and stockholders' equity  $338,932   $325,867 

 

4
 

 

First Federal of Northern Michigan Bancorp, Inc. and Subsidiaries          
Consolidated Statement of Income and Comprehensive Income          
(in thousands)   For the Three Months
    Ended March 31,
    2015    2014 
    (Unaudited) 
Interest income:          
Interest and fees on loans  $2,004   $1,710 
Interest and dividends on investments          
Taxable   294    151 
Tax-exempt   31    42 
Interest on mortgage-backed securities   288    142 
Total interest income   2,617    2,045 
           
Interest expense:          
Interest on deposits   235    187 
Interest on borrowings   66    63 
Total interest expense   301    249 
           
Net interest income   2,316    1,796 
Provision for loan losses   23    16 
Net interest income after provision for loan losses   2,293    1,780 
           
Non-interest income:          
Service charges and other fees   218    181 
Mortgage banking activities   101    96 
Net income (loss) on sale of premises and equipment,          
real estate owned and other repossessed assets   91    (5)
Other   84    64 
Total non-interest income   494    336 
           
Non-interest expense:          
Compensation and employee benefits   1,419    1,109 
FDIC Insurance Premiums   64    46 
Advertising   44    28 
Occupancy   280    236 
Amortization of intangible assets   61    30 
Service bureau charges   103    62 
Professional services   110    129 
Collection activity   63    18 
Real estate owned and other repossessed assets   18    17 
Other   269    220 
Total non-interest expense   2,431    1,895 
           
Income before income tax expense   356    221 
Income tax expense   —      —   
           
Net Income  $356   $221 
           
Other Comprehensive Income:          
Unrealized gain on investment securities - available for sale securities - net of tax   345    273 
Reclassification adjustment for gains realized in earnings - net of tax   —      —   
           
Comprehensive Income  $701   $494 
           
Per share data:          
Net Income per share          
Basic  $0.10   $0.08 
           
Weighted average number of shares outstanding          
Basic   3,727,014    2,884,049 
Including dilutive stock options   3,727,014    2,884,049 
Dividends per common share  $0.02   $0.02 
          

 

5
 

  

Safe Harbor Statement

 

This news release and other releases and reports issued by the Company, including reports to the Securities and Exchange Commission, may contain “forward-looking statements.” The Company cautions readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. The Company is including this statement for purposes of taking advantage of the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995.

 

 

 6


The following information was filed by First Federal Of Northern Michigan Bancorp, Inc. (FFNM) on Friday, April 24, 2015 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.

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Document And Entity Information
Consolidated Balance Sheet (parenthetical)
Consolidated Balance Sheet (unaudited)
Consolidated Statement Of Cash Flows (unaudited)
Consolidated Statement Of Changes In Stockholders' Equity (parenthetical)
Consolidated Statement Of Changes In Stockholders' Equity (unaudited)
Consolidated Statement Of Income And Comprehensive Income (unaudited)
Basis Of Financial Statement Presentation
Business Combinations
Business Combinations (details 1)
Business Combinations (details 2)
Business Combinations (details 3)
Business Combinations (details 4)
Business Combinations (details Narrative)
Business Combinations (details)
Business Combinations (tables)
Commitments To Extend Credit
Commitments To Extend Credit (details Narrative)
Commitments To Extend Credit (details)
Commitments To Extend Credit (tables)
Dividends
Fair Value Measurements
Fair Value Measurements (details 1)
Fair Value Measurements (details 2)
Fair Value Measurements (details)
Fair Value Measurements (tables)
Loans And Allowance For Loan Losses
Loans And Allowance For Loan Losses (details 1)
Loans And Allowance For Loan Losses (details 2)
Loans And Allowance For Loan Losses (details 3)
Loans And Allowance For Loan Losses (details 4)
Loans And Allowance For Loan Losses (details 5)
Loans And Allowance For Loan Losses (details 6)
Loans And Allowance For Loan Losses (details 7)
Loans And Allowance For Loan Losses (details 8)
Loans And Allowance For Loan Losses (details)
Loans And Allowance For Loan Losses (tables)
Principles Of Consolidation
Securities
Securities (details 1)
Securities (details 2)
Securities (details Narrative)
Securities (details)
Securities (tables)
Stock-based Compensation
Stock-based Compensation (details Narrative)
Stock-based Compensation (details)
Stock-based Compensation (tables)
Ticker: FFNM
CIK: 1128227
Form Type: 10-Q Quarterly Report
Accession Number: 0001387131-15-001639
Submitted to the SEC: Wed May 13 2015 4:04:34 PM EST
Accepted by the SEC: Wed May 13 2015
Period: Tuesday, March 31, 2015
Industry: National Commercial Banks

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